Understanding the volatility in your pension savings
How are my pension savings invested?
Your pension savings are invested in the world around us. The main ways of investing are owning part of a company (equities or shares), lending to companies (bonds) or lending to governments (gilts or government bonds).
You access these investments through “funds” which pool together money from lots of people to invest as one. Your money in the fund is shown by the number of “units” you have bought with your pension savings. These units have a price which can go up or down, which is the return you see in your investments.
You can make changes to your investment funds at any time through your Smart Pension member account or the Smart Pension app. If you do not make a choice, your savings are automatically invested in an investment strategy which invests in chosen funds on your behalf. The default investment strategy targets an allocation at retirement which is suitable to take a flexible income in retirement. There are two other retirement targets which can be chosen; an annuity purchase and cash. Sign in to your account to learn more about the investment options open to you.
How are my pension savings invested?
Your pension savings are invested in the world around us. The main ways of investing are owning part of a company (equities or shares), lending to companies (bonds) or lending to governments (gilts or government bonds).
You access these investments through “funds” which pool together money from lots of people to invest as one. Your money in the fund is shown by the number of “units” you have bought with your pension savings. These units have a price which can go up or down, which is the return you see in your investments.
You can make changes to your investment funds at any time through your Smart Pension member account or the Smart Pension app. If you do not make a choice, your savings are automatically invested in an investment strategy which invests in chosen funds on your behalf. The default investment strategy targets an allocation at retirement which is suitable to take a flexible income in retirement. There are two other retirement targets which can be chosen; an annuity purchase and cash. Sign in to your account to learn more about the investment options open to you.
Why are my investments going up and down?
Various events can cause investments to go up and down, including global pandemics, changes in government or central bank policies, war and crises, changes in the demand and supply of certain products, and much more.
While we can’t control the impact of these changes on investments, we look to offer a range of investment options. For the default investment strategy, we look to reduce the fluctuations by using lots of different types of investments, which are suitable for the long term. Your pension savings are invested for your future retirement and the aim is to provide strong outcomes over the long term.
All investments involve some degree of risk and you should think about your risk tolerance when you’re choosing your investments for your pension savings. Our default investment option has a long-term outlook and, although investments may go up and down in the shorter term, over the longer term they are expected to produce a positive return.
The chart shows the investment return of the Smart Sustainable Growth Fund, used in our default investment strategy, from April 2018 to July 2024. As you can see, the value of the £100 has gone up and down during the last six years, but over the entire period, the value has increased. Notably, there was a big fall in returns at the start of 2020, as a result of the global pandemic. This had recovered by the end of the year.
Gross performance, monthly data
Source: Mobius Life
Why are my investments going up and down?
Various events can cause investments to go up and down, including global pandemics, changes in government or central bank policies, war and crises, changes in the demand and supply of certain products, and much more.
While we can’t control the impact of these changes on investments, we look to offer a range of investment options. For the default investment strategy, we look to reduce the fluctuations by using lots of different types of investments, which are suitable for the long term. Your pension savings are invested for your future retirement and the aim is to provide strong outcomes over the long term.
All investments involve some degree of risk and you should think about your risk tolerance when you’re choosing your investments for your pension savings. Our default investment option has a long-term outlook and, although investments may go up and down in the shorter term, over the longer term they are expected to produce a positive return.
The chart shows the investment return of the Smart Sustainable Growth Fund, used in our default investment strategy, from April 2018 to July 2024. As you can see, the value of the £100 has gone up and down during the last six years, but over the entire period, the value has increased. Notably, there was a big fall in returns at the start of 2020, as a result of the global pandemic. This had recovered by the end of the year.
Gross performance, monthly data
Source: Mobius Life
Why may I see a bigger fall than usual in my investments?
Investments can go up and down in the shorter term. Over the longer term they are expected to produce a positive return, meaning that you have more money at retirement than you saved, which will help provide a good retirement.
In 2022, global investments were negatively impacted by Russia’s war in Ukraine, rising inflation and the cost of living and UK policy shocks. In August 2024, fears of a US recession triggered volatility across global markets. The Japanese Nikkei 225 index suffered its worst day since October 1987 (the Black Monday crash) and the sell-off continued in Europe.
Investment downturns have occurred multiple times before and are likely to happen again in the future – they are a normal part of investing. Whilst we can’t predict the future, past events show us that investment downturns have been followed by periods of recovery and growth.
On Monday 19th October 1987, also known as Black Monday, global investments fell more than 20%1 in a single day. It is widely thought that slow economic growth, investor panic and relatively new computer-driven trading models drove the downward spiral. Black Monday had knock-on effects on global economies, but with the help of central banks these economies fully recovered within a couple of years.
During the Global Financial Crisis of 2008-2009, the FTSE 100 (UK stocks) fell by over 31%2 in 2008. Governments intervened, central banks cut interest rates and more regulations were introduced to provide safety nets for investors. Investments bounced back quickly, with the FTSE 100 recovering c. 22%2 the following year3.
While we do not have a crystal ball to tell the future and cannot guarantee investments will always bounce back, we can see how investment cycles have behaved in the past. Some investments may do poorly compared to other investments over short time periods, and the opposite might happen in other time periods. Therefore, our default investment option diversifies across different investments, as well as increasing its allocation to investments known to be less risky as a member approaches retirement. We monitor investment performance on a regular basis with our appointment of external advisers.
Why may I see a bigger fall than usual in my investments?
Investments can go up and down in the shorter term. Over the longer term they are expected to produce a positive return, meaning that you have more money at retirement than you saved, which will help provide a good retirement.
In 2022, global investments were negatively impacted by Russia’s war in Ukraine, rising inflation and the cost of living and UK policy shocks. In August 2024, fears of a US recession triggered volatility across global markets. The Japanese Nikkei 225 index suffered its worst day since October 1987 (the Black Monday crash) and the sell-off continued in Europe.
Investment downturns have occurred multiple times before and are likely to happen again in the future – they are a normal part of investing. Whilst we can’t predict the future, past events show us that investment downturns have been followed by periods of recovery and growth.
On Monday 19th October 1987, also known as Black Monday, global investments fell more than 20%1 in a single day. It is widely thought that slow economic growth, investor panic and relatively new computer-driven trading models drove the downward spiral. Black Monday had knock-on effects on global economies, but with the help of central banks these economies fully recovered within a couple of years.
During the Global Financial Crisis of 2008-2009, the FTSE 100 (UK stocks) fell by over 31%2 in 2008. Governments intervened, central banks cut interest rates and more regulations were introduced to provide safety nets for investors. Investments bounced back quickly, with the FTSE 100 recovering c. 22%2 the following year3.
While we do not have a crystal ball to tell the future and cannot guarantee investments will always bounce back, we can see how investment cycles have behaved in the past. Some investments may do poorly compared to other investments over short time periods, and the opposite might happen in other time periods. Therefore, our default investment option diversifies across different investments, as well as increasing its allocation to investments known to be less risky as a member approaches retirement. We monitor investment performance on a regular basis with our appointment of external advisers.
What should I do when my investments fall?
You can make changes to your investments whenever you like. However, please be aware that “panic selling” can crystallise losses and potentially harm your future returns by missing out on the positive days. In times of high volatility, it is important not to panic or make any rash decisions about changes to your investments.
Our investment strategies look to provide strong returns by investing over the longer term across diversified investments rather than trying to profit from short-term turning points. If you invest in the self-select fund range, you may wish to check that your investment choices reflect your longer-term goals, as some individual funds and asset classes have different levels of risk and potential returns.
If you are close to retirement and in a predetermined investment strategy, you may wish to review the retirement target you have chosen and your retirement date. If you would like personalised advice, you should get in touch with an independent financial adviser. If you do not have an independent financial adviser, you can find information through the MoneyHelper website.
Contributions to your pension savings are taken and invested monthly, unless you choose otherwise. These regular contributions can smooth out the ups and downs of investment returns. If investments are doing well, they will be more expensive to buy. If investments aren’t doing well, they will be cheaper to buy. Purchasing investment units every month therefore means the cost should even out over time, and you’re investing in both good and bad market environments.
What should I do when my investments fall?
You can make changes to your investments whenever you like. However, please be aware that “panic selling” can crystallise losses and potentially harm your future returns by missing out on the positive days. In times of high volatility, it is important not to panic or make any rash decisions about changes to your investments.
Our investment strategies look to provide strong returns by investing over the longer term across diversified investments rather than trying to profit from short-term turning points. If you invest in the self-select fund range, you may wish to check that your investment choices reflect your longer-term goals, as some individual funds and asset classes have different levels of risk and potential returns.
If you are close to retirement and in a predetermined investment strategy, you may wish to review the retirement target you have chosen and your retirement date. If you would like personalised advice, you should get in touch with an independent financial adviser. If you do not have an independent financial adviser, you can find information through the MoneyHelper website.
Contributions to your pension savings are taken and invested monthly, unless you choose otherwise. These regular contributions can smooth out the ups and downs of investment returns. If investments are doing well, they will be more expensive to buy. If investments aren’t doing well, they will be cheaper to buy. Purchasing investment units every month therefore means the cost should even out over time, and you’re investing in both good and bad market environments.
Where can I find my investments?
You can find your investment options by signing in to your Smart Pension account and clicking the ‘Investments’ tile on your dashboard. Get help signing in here.
If you want to read more about our investment approach, read our latest guide here.
Sources
2www.forecast-chart.com/historical-ftse-100.html
3Financial Times, market data
Where can I find my investments?
You can find your investment options by signing in to your Smart Pension account and clicking the ‘Investments’ tile on your dashboard. Get help signing in here.
If you want to read more about our investment approach, read our latest guide here.
Sources
2www.forecast-chart.com/historical-ftse-100.html
3Financial Times, market data
Instant changes to your
pension savings
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Instant changes to your
pension savings
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Instant changes to your
pension savings
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Instant changes to your
pension savings
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Instant changes to your
pension savings
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Smart Pension's fund choices
Smart Active Impact Bond Fund
Aims to invest in bonds which have an environmental impact and generate financial return above the global green bond market, taking into account Environmental, Social and Governance issues when selecting investments.
Smart Active Impact Equity Fund
The aim of this fund is to invest in equities which provide growth over the long term (being a period of five years or more) and invest in companies that contribute to the achievement of the United Nations’ Sustainable Development Goals.
Smart All Stocks Index – Linked Gilts Index Fund
Aims to track the return of the FTSE Actuaries British Government Index Linked All Stocks Index, which features UK government bonds with returns linked to the Retail Price Index (RPI).
Smart Annuity Fund
Aims to improve potential outcomes for investors likely to purchase fixed annuities by providing a diversified exposure to assets that reflect the broad characteristics of investments underlying a typical traditional level annuity product, incorporating Environmental, Social and Governance (“ESG”) considerations as part of the investment strategy.
The fund cannot provide full protection against changes in annuity rates for individual members as these also depend upon a number of other factors (e.g. changes to mortality assumptions).
Smart Cash Fund
Aims to maintain capital and provide a return in-line with money market rates by investing in a range of money market securities denominated in sterling.
Smart Ethical and Climate Fund
Aims to track a filtered index, which excludes companies that operate in industries that breach certain ethical criteria.
Smart Global Bond Index Fund
Aims to invest in different types of bonds in the UK and overseas, taking into account Environmental, Social and Governance factors.
Smart Growth Fund – Higher Risk
This fund carries a higher risk of fluctuation to your savings than other growth funds available but has the potential for high growth, though this is not guaranteed.
Smart Growth Fund – Lower Risk
This fund carries the lowest risk of fluctuation to your savings than other growth funds available but also reduced likelihood of a high return. It may be suitable if you are concerned about volatility.
Smart Income Fund
Aims to provide long-term investment growth up to retirement, and to support flexible income during retirement, taking into account Environmental, Social and Governance factors.
Smart North America Equity Index Fund
Aims to provide broad exposure to companies in the North American equity market, taking into account Environmental, Social and Governance factors.
Smart Sharia Fund
Aims to create long term appreciation of capital through investment in a diversified portfolio of securities which meets Islamic investment principles.
Smart Sustainable Growth Core
Aims to take advantage of Environmental, Social and Governance factors by investing more in companies which score well in these areas.
Smart Sustainable Growth Fund
Aims to take advantage of Environmental, Social and Governance factors by investing more in companies which score well in these areas to mitigate Environmental, Social and Governance risks and benefit people and the planet by having a moderate allocation to investments contributing to solutions for environmental and social issues.
Smart Sustainable Growth Plus
Aims to take advantage of Environmental, Social and Governance factors by investing more in companies which score well in these areas to mitigate Environmental, Social and Governance risks and benefit people and the planet by having a high allocation to investments contributing to solutions for environmental and social issues.
Smart UK Equity Index Fund
Aims to provide broad exposure to the UK stock market, taking into account Environmental, Social and Governance factors.
Smart World (ex UK) Developed Equity Index Fund
Aims to provide broad exposure to large and mid-cap companies in the developed world, excluding the UK, taking into account Environmental, Social and Governance factors.
Smart World Emerging Markets Equity Index Fund
Aims to provide access to key emerging economies taking into account Environmental, Social and Governance factors.
